Written evidence submitted by Cornwall Council, Council for the Isles of Scilly and The Cornwall and Isles of Scilly Local Enterprise Partnership (LRS0003)

Introduction

Cornwall Council is a unitary authority with a resident population of 569,578 [Mid-Year Population Estimates, 2020] and an enterprise business count of 24,450 [UK Business Counts, 2019]. Cornwall is primarily a microbusiness economy with eighty eight percent of enterprises employing 0-9 employees. Cornwall only has 70 large employers with over 250 employees [UK Business Counts, 2019].

We are the largest rural Unitary Authority in England and are also the first rural authority to receive a devolution deal in 2015 on which Cornwall has been delivering a strong track record – independently verified by the Ministry of Housing, Communities and Local Government, as well as in the Warwick Economics evaluation for BEIS, due to come out this spring/summer. The Cornwall Deal has been a first step towards ‘closing the gap’ that characterises Cornwall’s position vis-à-vis national averages. By securing freedoms to design local policy solutions to the place-specific challenges of their rural and peripheral communities, Cornwall Council has delivered significant achievements, including crucial improvements to their transport infrastructure to better serve local need, the launch of a Growth & Skills Hub, and tackling the higher than average fuel poverty rate.

There are 2,260 people living in the Isles of Scilly, with the lowest population density at 137 per km2. The islands have seen a population decline of 0.9% from 2012 to 2017. 25% of the population are 65+ and only 16.6% are between 20 and 34 years old.  Most of the workforce both live and work on the islands, but it is difficult to attract younger families; there is a shortage of available housing, house prices are 15 times that of annual household income and 26% lack central heating. 

Tourism is the biggest sector making the islands very vulnerable to changes in visitor trends/demographics. The islands are also vulnerable in respect of transport; there is a single sea transport provider, the Isles of Scilly Steamship Company, and bad weather effects sea travel with a reduced service in the Winter months.  For air links there are two providers, the Isles of Scilly Steamship Company provide a fixed wing service and Penzance Helicopters are aiming to provide a rotary wing option from the summer of 2020.  They are also vulnerable in respect of a secure and constant supply of electricity from the grid, which is provided via a single connecting cable.

The Cornwall and Isles of Scilly Local Enterprise Partnership (LEP) was launched in May 2011. Private sector-led, it is a partnership between the private and public sectors and is driving the economic strategy for the area, determining local priorities and undertaking activities to drive growth and the creation of local jobs.  The LEP is business-driven and our board includes 15 appointed representatives of the private sector, 3 nominated Cornwall Council representatives and 1 nominated representative from the Council of the Isles of Scilly. Our mission is that by 2030, Cornwall and Isles of Scilly will be the place where businesses thrive, and people enjoy an outstanding quality of life. Our Local Industrial Strategy identifies the following distinctive opportunities; Clean energy resources, Geo-resources; Data and space; Visitor economy and Agri-Food.

More detail on the impact of COVID 19 on our economy can be seen in Appendix 1.

Executive Summary

The “Levelling up” of economic performance at both local and regional level will require long term fiscal and policy decisions.  There are no quick fixes or silver bullets as true levelling up will require long-term political commitment across a range of policy areas, including significant investment into economic development of areas of the UK currently lagging behind and true devolution of responsibility for delivering against the levelling up agendas to the areas that need it.

A large body of recent research reports[1] conclude that the current centralised system of government funding and policy design, delivery and decision-making delivers sub optimal results in terms of levelling up and addressing economic inequalities between different areas of the UK.  They also all support a more localised approach with devolution of budgets and decision making to local areas as a key design principle.

There are a number of cross cutting interventions from across Government purview that contribute to this levelling up.  Interventions to “level” the per pupil allocation in the education system will help, over time, to ensure that attainment levels of rural and island communities (where the cost of delivery is often higher) and more deprived areas equal that of the our more affluent areas.  In addition, increases in the investment in road, broadband and rail infrastructure outside the South East of England and the M4 corridor will help to ensure that all areas of England can benefit from improved connectivity to our major centres of population. 

However, in addition to a re-allocation of existing Government  spending there is an urgent need to replace the current EU Regional and Rural Development Programmes (i.e. 2014 to 2020 ERDF, ESF, EAFRD and EMFF) and other Government schemes designed to stimulate growth (e.g. Local Growth Fund, Getting Building Fund) with a UK Shared Prosperity Fund (SPF).  The SPF must be an investment of at least equal value to current EU and national funding for economic development AND must have a razor-sharp focus on economic development activity with the specific purpose of making all areas of the UK prosper by placing those areas at the heart of the decision making for this fund.  Beyond this there is also the need to devolve current levels of adult skills funding to local areas as that will allow us to respond more quickly to a very dynamic labour marketplace.

Our approach to this task will involve investment to unlock our potential in energy, geo resources, space, data and advanced manufacturing as well as driving best in class performance in our existing business base and renewed Town Centre and High Street vitality.  If the focus of the SPF is watered down to incorporate wider Government priorities, its effectiveness will be diminished.

The future prosperity of the UK depends on unlocking the potential of all its areas, towns, high streets businesses and residents. Prior to the COVID 19 outbreak the OECD had already published research indicating that the UK was the nation with the greatest regional disparities (see chart below) and these are likely to increase once the true impact of the COVID 19 outbreak on local economies becomes apparent. 

In addition, as the maps below illustrate, regional inequality in the UK is a more complex issue than a simple North/South divide.

Therefore, it is in this context that this response concentrates on the role that the SPF can play in levelling up the economy through interventions designed to stimulate inclusive growth and improvements in the productivity in areas of the UK such as Cornwall and the Isles of Scilly[2] . Our key ask is therefore for a fully devolved ‘single pot’ SPF investment into our local economy of £700m over the next 10 years.

The immense productivity gap that currently exists between the prosperous South East of England on the one hand and the rest of the country on the other must be therefore be levelled-up by investing in the LEP areas that are currently lagging behind.    In addition, Government must recognise that for those areas that are outside the agglomeration impact of a city region, the need for an alternative to the current “trickle down” policy environment is paramount.

The economic shock caused by COVID 19, which the OBR estimates as the largest ever shock to the UK economy[3], has also hit some areas in the UK worse than others and this impact is expected to exacerbate the need for significant and sustained levelling up.   The current economic impact of COVID 19 on Cornwall and Isles of Scilly is outlined below with more details available in Appendix 1.

1. Evidence base:

It is well documented that the impact of Covid19 on local economies as well as the ability of different areas to recover and renew needs to be a key consideration for the UK Shared Prosperity Fund and our response to this inquiry is set in this context. 

A large body of recent research reports[4] conclude that the current centralised system of government funding and policy design, delivery and decision-making delivers sub optimal results in terms of levelling up and addressing economic inequalities between different areas of the UK.  They also all support a more localised approach with devolution of budgets and decision making to local areas as a key design principle. 

2. Local structures:

As a relatively new unitary council formed out of significant local Government reform (6 Districts and 1 County Council) and serving a population of c570,000 we stand ready to work with Government as a blueprint for reorganisation and devolution in non-metropolitan areas. We want to build on Cornwall’s track record of delivery against our first devolution deal with a bold package of further devolution that will include the UKSPF but also other aligned budgets such as adult skills funding.  We are just in the process of renewing our employer led Employment and Skills Board and developing our Skills Action Plan and aligning these policy areas and budgets with the SPF will be integral to our growth and recovery plans.

Two-thirds of our residents say too many decisions are made outside the local area. We are therefore willing to trailblaze a non-metropolitan model in exchange for real devolution of power to Cornwall, recognising Cornish status as a national minority alongside the Welsh, Irish and Scots. In setting guiding principles for the UK SPF, the Government should therefore prioritise devolved decision making and delivery to the local level to address regional inequality and variations in economic contraction.

We offer Government a model to test the role that further devolution to rural areas with a dispersed settlement pattern can play in the “levelling up” agenda.  The systematic bias in national policy and funding decisions toward cities can only be levelled up by targeting LEP areas, towns and high streets that are lagging behind and therefore varying the policy approaches according to the differing nature of the local areas and their challenges. 

Whilst we recognise the challenges caused by overlapping areas and organisations elsewhere in England, we believe that we have the right governance structures in place to take forward a fully developed SPF.     With two strong unitary councils, a coterminous LEP area and a strong Leadership Board (a rural alternative to a Combined Authority, we believe no further reform of the structures is required in CIOS.  See Diagram below.

The integration of health and care into the Leadership Board is evidence of the transformation happening in health and care as well as the challenges we face due to our ageing population.  We therefore believe that further devolution is key to addressing the levelling up agenda and that resetting the relationship between central and local government is vital with more responsibilities and budget devolved to local authority and/or LEP areas.

3. Stakeholder engagement:

Cornwall and the Isles of Scilly prides itself on the collaborative approach we take to stakeholder engagement and consultation.  Developed over 20+ years of being involved in the design and delivery of EU programmes we have always adopted a bottom up and collaborative approach.  Our unitary status (Cornwall Council and the Council for the Isles of Scilly), commitment to double devolution where appropriate (to Town and Parish Councils) and our co-terminosity with the Cornwall and Isles of Scilly Local Enterprise Partnership helps to facilitate this approach.

Cornwall Council has a strong culture of engagement with its stakeholders and residents. This was noted in an independent evaluation undertaken by Warwick Economics and Development Ltd (WECD), commissioned by MHCLG, BEIS and the Cities and Local Growth Unit to examine the internal institutional processes, progress and governance of authorities across England with a devolution deal.

WECD visited Cornwall in March 2019 and provided initial high-level feedback stating that Cornwall Council demonstrated a strong governance model, a culture of continuous improvement, a devolution programme that was well organised and comprehensive, transparency of officers, Members and external representatives, and commitment by senior management and political leadership.

Early indications of the research findings were presented to Cornwall and the Isles of Scilly Leadership Board in March 2020, which showed that Cornwall proved to be the exception in relation to public and business understanding and perceptions of key local governance roles and concepts that are part of devolved institutions.

We also continue to work with Government to build support for a second devolution deal in Cornwall, ahead of the publication of the White Paper on Devolution and Local Recovery expected in the autumn. Through Britain’s Leading Edge we met Treasury officials at the beginning of July to test support for our Net Zero Evergreen Infrastructure Fund proposal, and at the end of July we welcomed the Minister of State for Regional Growth and Local Government during his two-day visit to Penzance, Falmouth, Newquay and Wadebridge to see first-hand the economic impact of Covid-19 on Cornwall’s economy and the steps we would like the Government to take to support local businesses.  Cornwall has also led the establishment of a range of external networks designed to engage with Government:

• Intermediate Body Network: established by Cornwall Council’s Intermediate Body team in 2018, this brings together the 11 authorities with Intermediate Body status giving them local control over how European funding is used. Collectively we represent 47% of England’s GVA and have been recognised as a statutory consultee to the Government’s long-awaited proposals for a Shared Prosperity Fund.
• Less Developed Regions Network: established by Cornwall Council’s Economic Growth team in 2019, this brings together the British local authorities representing Less Developed in Europe - on latest data, five regions, up from two in the current round of European funding. 
• Britain’s Leading Edge: established following a mandate from the Leadership Board in early 2019, this brings together upper-tier authorities that have no major cities. The regions meeting our criteria represent 44% of the country’s land mass, 11% of the population and 8% of GVA – equivalent to the English Core Cities.

• Great South West: established by the relevant LEPs with considerable support from Cornwall Council, this brings together a powerful alliance of business leaders, LEPs, universities, colleges and local government. With a population of over 3 million and an economy of £64 billion the potential of our regions can be unlocked through this collaboration.

• UK SPF Steering Group – Chaired by a Private sector LEP Board member this group brings together partners who have been involved in the delivery of previous EU programmes in order to share their experiences and thoughts for how the UK SPF can be delivered.  Membership of the group includes the Cornwall Chamber of Commerce, the FSB, Cornwall Council, Council for the Isles of Scilly, the University of Exeter, Falmouth University, the chair of one of our Local Action Groups, Cornwall Neighbourhoods for Change, Cornwall Association of Local Councils and other community representatives.
• Local Industrial Strategy - The CIoS Industrial Strategy was developed by the CIoS LEP in collaboration with local partners and stakeholders and reflects shared ambitions for the future of the CIoS economy.

Our commitment to collaboration and the value we derive from it has also been recognised locally but also by MHCLG.  In developing the case for our Integrated Territorial Investment Strategy, they stated in reports that: -

“The most obvious point of good practice to date has been the early allocation of a substantial proportion of the ERDF budget. This is due in part to the long-term experience of Cornwall Council and the CIoS LEP, and also due to good communication with beneficiaries in the region”

Whilst there is always room for improvement our upper tier authorities are seen as key delivery partners for growth and by actively engaging in and resourcing the strategy development process, acting as lead and/or accountable body for delivery where necessary and/or providing match funding for delivery we can demonstrate our credentials as credible partners for Government.

4. Sustainable local economies:

In line with Cornwall Council’s declaration of a climate emergency, a higher priority should be given to environmental goals in future support programmes recognising the need for urgent action to address the climate crisis, restore nature and promote green business practices (e.g. Green Tourism and skills required for Green Growth and recovery).

The CIoS draft Local Industrial Strategy echoes this ambition for carbon neutrality by 2030 and the Great South West’s ambition to be the first net zero carbon region in England both create the policy and strategy alignment required to deliver the necessary change. The importance of skills in the growth agenda and on social mobility and overall inclusive growth cannot be underestimated. Government needs to create opportunity and stimulate the economy through a green economic recovery that has employer-led reskilling and upskilling embedded at local level.

Future government immigration policy is also critical to the labour market for many of our key sectors as they are reliant on seasonal labour for much of their workforce. The further and higher education sector is also vital and therefore negotiating future access (as a “third country”) to the EU’s Horizon Europe and ERASMUS programmes is of great importance.  If access to these schemes cannot be agreed, then alternative UK provision will need to be put in place. In addition to general skills provision, schemes to tackle long term unemployment and promote inclusive growth are vital for any long-term recovery.  Young people and those furthest from the labour market may find themselves crowded out by the more recently unemployed during the early stages of recovery.

5. Targeted regional investment:

Through the publishing of the Devolution White Paper in the Autumn of 2020 Government should ensure that the focus remains on levelling up regional economic inequalities through devolution to non-metropolitan areas. Due to our dispersed settlement pattern we have 19 key towns in Cornwall and 1 key town on the Isles of Scilly[5] that act as service and employment hubs for their surrounding areas.  How we target resources to aid their recovery and improve their vitality is a key issue that will require a different approach than an urban area or City Region. 

There is no ‘one size fits all’ solution to lifting productivity and “levelling up”. The productivity challenge in CIoS is multi-faceted, requiring orchestrated and long-term action across the foundations of productivity. Therefore, we believe that the focus for recovery should not be on national priorities for certain specific sectors but on the challenges, goals and vision for the future economy at a local level.   This approach will enable us to build on our existing foundations (e.g. University provision, Enterprise Zones for Food and Energy, Innovation Centres and RD&I) as well as develop new activity (e.g. Enterprise Zones for Space and Marine and a Tourism and Creative Innovation Zone). 

If Government focuses on the Five Foundations of productivity at national level, local areas can then define how these relate to their local economy, sector mix, etc. Conditions attached to future support should also focus on the delivery of “outcomes” (e.g. % improvement in productivity) required for sustainable and inclusive growth for the identified local area rather than arbitrary outputs (e.g. number of businesses supported).  

6. Regional funding:

As part of the Government’s levelling-up agenda, we would anticipate that future recovery funding will be allocated according to a needs based formula that is based on GDP per head or productivity per hour worked rather than a complex methodology that draws on a number of different metrics that often disadvantage rural and peripheral areas (e.g. population numbers and IMD).  There should also be higher per capita allocations for those areas that are furthest behind in order to provide them with additional resources to target specific priorities. We also seek a commitment that we will not be left with a gap in our funding and the end of 2020, to ensure that we can continue delivering concrete results on the Government’s ambitions for a resilient, net zero and productive national economy.

We also propose a CIoS delivery model for a UK SPF that is a fully devolved programme designed around local control and accountability. It is based on lessons learnt from more than 20 years of experience of successfully implementing EU, national and local economic regeneration funding and would give CIoS the same powers and responsibilities that the Greater London Authority has under the current EU programmes – NB: we are not asking for anything that does not already exist for urban areas. Our delivery model will deliver a 10-year single pot programme that is cheaper to administer than current EU programmes, is more responsive to local need and strips away unnecessary bureaucracy in order to make it more business friendly whilst at the same time remaining fully compliant with national rules governing UK SPF.

By adopting a single ‘Delivery Framework’ approach with delivery devolved to the local level, it will be possible to align the interests and funding from numerous Government Departments into one clear programme of activity that is clear about the strategic priorities that any funding needs to deliver as well as the budgets available and the outcomes that will need to be delivered in return.

The national UK SPF documentation will make it clear what Government wants to see delivered by the funding and how the delivery structures would operate in a devolved context. By agreeing a single CIoS Programme Delivery Framework approach that nests within the national documentation Government can be certain that the funds will deliver the overall strategic aims of the UK SPF in a fully compliant manner whilst leaving the details of delivery to local partners.

7. Project Speed:

Post-pandemic economic recovery has to provide a supportive environment that not only re-frames the narrative around ‘the central and the local’ but grants areas such as Cornwall and the Isles of Scilly a greater level of control over their own policymaking, development and delivery.  A place-based and sector blind approach is required not only because of the place-based variation in the size of economic contraction caused by the pandemic, but also because different regions have different strengths and opportunities. 

Specifically, our proposed SPF delivery model will contribute to “Project Speed” in the following ways: -

• No gap between EU Programme delivery and delivery funded by the UK SPF at the end of 2020 will ensure that momentum is not lost when the period for new approvals under the current ESIF programme comes to an end.  This will accelerate delivery.
• A simplified and less bureaucratic application process will be more business friendly and cheaper to administer that the current EU programmes.  This will increase engagement by the private sector and reduce the cost of delivery to the taxpayer.
• A focus on outcomes rather than outputs will deliver greater benefit.  This will increase the value for money of interventions.
• Using existing and well-established structures and experienced staff.  This will accelerate the transition from the old to the new funding environment.

End of Executive Summary

Detailed response

In the context of the impacts outlined above and in Appendix 1 our detailed responses to the questions posed by the BEIS inquiry are outlined below.

1.               Evidence base: what evidence exists to measure the performance of the various tiers of regional and local government in the delivery of growth? What evidence have regional and local leaders based their local or regional industrial strategies on, and what forms of stakeholder engagement were included in the drafting of priorities? Considering the cost of institutions, what cost benefit analysis exists to show the value for taxpayers’ money when compared to the delivery of wealth and job creation?

Cornwall Council is the largest rural Unitary Authority in England and are also the first rural authority to receive a devolution deal in 2015 on which Cornwall has been delivering a strong track record – independently verified by the Ministry of Housing, Communities and Local Government, as well as in the Warwick Economics evaluation for BEIS, due to come out this spring/summer. The Cornwall Deal has been a first step towards ‘closing the gap’ that characterises Cornwall’s position vis-à-vis national averages. By securing freedoms to design local policy solutions to the place-specific challenges of their rural and peripheral communities, Cornwall Council has delivered significant achievements, including crucial improvements to their transport infrastructure to better serve local need, the launch of a Growth & Skills Hub, and tackling the higher than average fuel poverty rate.

The Council for the Isles of Scilly first met on 2 April 1891. At that time the Council was granted the power to deal with all aspects of the islands’ administration with powers equal to those of mainland county councils.  The Council of the Isles of Scilly is actually one of only two sui generis unitary authorities in the United Kingdom, the other being the City of London Corporation. This means that all other councils in England and Wales will fit into a more rigid system of legislation that dictates whether something is to affect those genres of government it is clear as to the extent of that legislation. 

With Scilly and the City of London, any such application of legislation needs to be made explicit within the legislation that it is to be applied to us. We are the responsible authority for education, housing, waste management, fire services, highways, environmental health, planning, social services, coastal defence, promotion of economic development and emergency planning. We also own and operate St Mary’s Airport, which is central to the local economy, and we provide the water supply for St Mary’s and Bryher.  Our unusual status also means that some administrative law that applies in the rest of England applies in modified form in the islands.

In 2018 we were one of the first areas nationally to publish a post Brexit Framework which set out policy, fiscal, sector and devolution asks reflecting our ambitions for Cornwall and the Isles of Scilly, to enable greater determination over how our region can prosper. New Frontiers  proposed a new locally controlled regional economic development funding model, innovative approaches to building more affordable homes through locally directed infrastructure and investments and flexibility over planning changes to regulations that inhibit business and have a particular impact on our region; sector deals in our space, creative, digital and clean tech industries that meet the challenges of the Industrial Strategy and are relevant to our local economy; and the devolution of powers in areas such as health and social care that will promote technology enabled care, promote joint working and on prevention.

A range of local, regional and national evidence has been used to inform our response to the first part of this question.  Grant Thornton’s “Placed Based Growth – Unleashing counties’ role in levelling up England” report concluded that “With a geographic coverage that covers much of England, county authorities are well placed to meet this need. They are places where people live and work accounting for 46% of England’s population, 47% of its homes and 48% of its businesses. At a very simple level they are the ‘places’ individuals identify with, be that Surrey, Cornwall, Derbyshire or Essex. It is a combination of factors that places county authorities at the heart of place-based growth. They offer a broad reflection on different experiences, from those at the heart of driving economic growth through to those facing significant socioeconomic challenge”.

The report also suggested a number of “enablers” that are required to deliver place-based growth and in Cornwall and the Isles of Scilly we are confident that we have many of them already in place.  The suggested enablers are as follows: -

• Strong local leadership – Strong leadership is vital for creating a clear – and importantly – shared vision for a place which enables partners to work together in a single direction.
• Quality of relationships – Quality of relationships is particularly important where politics may differ. These relationships are therefore built on a combination of maturity and trust. It is a combination that enables individuals to put place before organisational or political agendas.
• A partnership approach with governance structures that facilitate joint working – Where it worked well, places pointed to effective partnership working across health, education, police, LEP’s and districts.
• The creation of joint strategic plans – Attempting to align the long-term spatial priorities with economic, environmental and infrastructure priorities on a county geography.
• Clear communication – All of the above actions were also strengthened though clear communication. This was particularly the case where there were a large number of local partners as communication was seen as a key influencing tool.
• Funding – There can be no doubt that funding continues to play an important enabling role, particularly as county authorities have wrestled with the challenges of austerity and increasing demand pressures on core statutory services.

The report also concluded that: -

• Rather than a focus on the ‘north-south divide’, government economic and investment assessments should identify those places where the ‘gap’ is greatest – either to the national average or between different places – and focus investment decisions on closing that gap and levelling up local economies.
• Funding processes need to be streamlined and simplified. New funding should be focused on building capacity to deliver strategic growth priorities. This could lead to increased efficiencies if fragmented funding is rationalised into fewer funding streams, or in a single funding pot, with the result that more money is actually spent on frontline delivery.
• The Devolution White Paper must consider how devolution of powers to county authorities could assist in levelling-up the country. This should include devolving significant budgets and powers down to councils, shaped around existing county authorities and local leadership but recognising the additional complexity in two-tier local authority areas and whether structural changes are required.
• Growth Boards should be established in every county authority area. As part of this a statutory duty should be placed on county authorities to convene and coordinate key stakeholders (which could include neighbouring authorities). These Growth Boards should be governed by a national framework which would cover the agreed ‘building blocks’ for growth – powers, governance, funding and capacity. Growth Boards should be insight and data led. Learning from the Local Industrial Strategy evidence bases, Growth Boards should develop a clear, consistent and common evidence base that identifies strengths, opportunities and challenges for the place and develops data driven approaches to identifying priorities, solutions and appraisal of investment.

• Planning responsibilities should be reviewed with responsibility for strategic planning given to county authorities. In line with the recently published final report of the Building Better, Building Beautiful Commission, Government should consider how county authorities, along with neighbouring unitary authorities within the county boundary, could take a more material role in the strategic and spatial planning process.
• The National Infrastructure Commission should ensure greater consideration of the infrastructure requirements in non-metropolitan areas. National infrastructure assessments could consider how better investment in infrastructure outside metropolitan areas could link to wider growth-related matters that would help to level up the economy across the country.
• Skills provision and growth need to be aligned. At the heart of this sits a need to ensure that the current and future workforce have the skills required to deliver future growth. The Government has committed in their 2019 election manifesto to a £3 billion National Skills Fund and local government must play a key role in how this funding is allocated to meet skills needs in a locality. Review structures and powers to ensure a greater degree of co-terminosity around places. This review would ensure that decisions about a ‘place’ are being made about a consistent ‘place’. It would remove the need for different conversations and streamline the approach to making decisions.
• Bring talent together. Currently talent and expertise are spread across multiple organisations within a place. Joining up key growth teams and pooling budgets at a county scale will grow capacity and create more effective and better resourced delivery teams.

Further evidence is supplied by the UK2070 Commission independent inquiry into city and regional inequalities in the UK as it states several times that “the UK is the most centralised of western democracies and as such the patterns of government expenditure are critical and at present a large part of Government expenditure per head is going to London. The regional patterns of inequality are deep and structural: the dependence on the Capital region with limited spill-over benefits; housing constraints; struggling communities requiring increasing support; investment in infrastructure has a short-term focus; and, the current economic conditions impact quality of life and threaten key environmental resources”. It also concluded that a huge gulf exists between the UK’s best and worst performing regions and towns. Research by Professor Philip McCann undertaken for the UK 2070 Commission compared the UK with 30 OECD countries across a broad range of 28 indicators. 

The report concluded that: “The UK is one of the most interregionally unequal countries in the industrialised world, and almost certainly the most interregionally unequal large high-income country.” See below.

Finally, it concluded that by enhancing local devolution, rolled out systematically with transfer of powers and resources to a comprehensive framework of mayoral and combined authorities, was required to deliver the decentralisation of central government functions for England in terms of budgets and ministerial responsibilities to align with local and transregional devolution.

A Joseph Rowntree Foundation report has estimated that dealing with the effects of poverty costs the UK £78 billion a year. London is at the leading edge of a broader national problem about house prices increasing to create growing problems about unaffordability and un-liveability for younger new entrants and the report highlights that this is also the case in peripheral rural areas like the Lleyn or Cornwall. 

The continued concentration of economic growth in London and its wider region has been possible because of sustained public investment in infrastructure yet the opportunity cost of low productivity in many regions of the UK acts as a severe drag on the economy. The chart below shows the extent of the disparity between London and the rest. CIoS is further behind with labour productivity just above 70% of the UK average, which as can be inferred from the chart is below the worst regions and way below the SW average.

The report also states that for the past 50 years, government policy has been that spatial inequalities are undesirable, unacceptable and should be remedied. Policy labelling has been around unemployment hotspots or areas of deprivation rather than the potential of an area to create ‘new markets’ and unlock opportunities. Interventions usually arise as and when crises arise.  

It concludes that this is a flawed strategic approach and that in order to help foster local growth, a combination of local leadership with a clear long-term vision leading strategic and local sustained action is needed in most areas. Furthermore, it suggested that there should be a twin focus on those key industrial sectors that will drive productivity and on the foundations of local economies. This is particularly important if policy interventions are not to end up excluding rural areas and marginalised towns from the wealth creating activity being promoted nationally.  Our draft Local Industrial Strategy clearly articulates our desire to deliver this twin focus.

The Local Government Association commissioned Localis in 2020 to undertake a study into “Fiscal Devolution” and the opportunity to adopt an international approach “Rethinking Local”.  The Chair of the LGA’s People and Places Board commented that: -

“As this report sets out, the UK is an international outlier, one of the most fiscally centralised countries in the developed world. Local authorities in Germany, Switzerland and Holland can access a diverse range of revenue sources. By contrast councils in England are only able to levy two taxes and both are subject to significant intervention and control by Whitehall and both stand increasingly exposed in the light of long-term changes in home ownership and business composition. As we look ahead towards the long process of economic and social recovery, this gap in local power and autonomy across England risks seeing our communities fall ever further behind”.

The Institute of Fiscal Studies have also recently published a report entitled “Sharing Prosperity? Options and issues for the UK SPF” and amongst its findings and recommendations it concluded that: -

• The Government has highlighted boosting productivity and tackling opportunities as two objectives of the UK SPF
• A key issue is the role of the “needs” versus “outcomes” in funding decisions, and the extent to which competitive bidding is used
• The geographic areas allocations are based on will be important
• It will be important to consider how the UK SPF fits into a complex patchwork of place-based policies

All the above are national reports designed to further the debate around the “levelling up” agenda.  They all conclude that the current centralised system of programme design, delivery and decision-making delivers sub optimal results and all support a more localised approach with devolution of budgets and decision making to local areas as a key design principle.  We would support this hypothesis.

At local level, as part of work to ascertain the benefit of the EU programmes to Cornwall and the Isles of Scilly, our ESIF Growth Programme team commissioned Ash Futures, an external independent consultant, to undertake a review that compared the economic progress of Cornwall and the Isles of Scilly since 2000 with national averages and a number of broadly comparable areas. Whilst the report identified that there is more work to do in order to level up our economy it also recognises that the overall story emerging is that economic growth within CIoS has been relatively strong during this period and that on a number of metrics progress has been greater than other areas.  A comparison of the areas and the GVA change delivered between 1997 and 2017 can be seen below.

In addition, an analysis of key econometric indicators was undertaken and CIoS was ranked in terms of how it performed against the 8 comparator areas.  The results of this analysis can be seen in the table below.

Whilst it is clear that the extra EU funds available to Cornwall and the IoS as a Less Developed Region (and formerly a Convergence and Objective One region under previous EU programmes) are a factor in this change we would argue that local input into to programme design and delivery have also been a factor as we have grown faster than other less developed areas who have been in receipt of the same (or even greater) per head allocations. The Ash Futures report also concluded that: -

• over the past 20 years CIoS has experienced relatively robust economic and employment growth and this may have influenced the relatively strong net population growth. Several of the other rural comparator areas certainly did not experience the same population dynamics over this period. 
• There are also some positive signs relating to the business community, with strong growth in the number of scale-ups (fast growing businesses) and ‘knowledge intensive’ businesses.
• The proportion of working-age people with higher qualifications has increased more strongly in CIoS than elsewhere. 

With regards to our Local Industrial Strategy we were about to embark on the Government approval process just as the COVID 19 pandemic caused the process to be paused.  Our draft strategy was developed after significant levels of local stakeholder consultation, the production of an independent evidence base undertaken by Metro Dynamics and through the challenge of an external and independent “critical friend panel”.  Our draft Local Industrial Strategy has been endorsed by our LEP, Cornwall Council, the Council of the Isles of Scilly and the Cornwall and Isles of Scilly Leadership Board so we are confident that whilst is may need slight revisions to reflect the impact of COVID 19 on our economy the general direction outlined in the strategy (see below) is both evidenced based and fully endorsed[6] at local level. 

However, since starting the process of developing our LIS it has been felt that the focus on the Grand Challenges may not be as relevant as first thought or as set out in the LIS guidance, and although the concept of driving up productivity is a sensible approach, to focus primarily on productivity without adequate consideration to the climate emergency, environmental growth, Town Centre and High Street Vitality and social inclusion was an approach that was not supported locally before COVID 19 and is definitely not the necessary/sole focus required Post COVID 19.  Therefore, without a refresh, we do not believe the Governments current Industrial Strategy to be completely relevant to the current situation as it does not include any consideration for wider social and environmental factors that are now in play post COVID 19. 

Rather than start from scratch though we would urge Government to build on the work undertaken at local level to develop Local Industrial Strategies as these are for the most part either agreed or in final draft form across the country.  Using existing policy and delivery strategies will speed up Post COVID 19 recovery.  The Grand Challenges set out in the Industrial Strategy are challenges set nationally, and are opportunities believed to be of national importance and significance.

Post COVID 19 we believe the Grand Challenges should be localised within a national framework and should consider climate change, regional imbalances/the levelling up agenda, Town and High Street Vitality and inequality/social inclusion. Empowering local economies to find the solutions to these local, national and global challenges, whilst supporting and driving innovation, investing into infrastructure, and training and education will ultimately give local economies an opportunity to build on their local strengths and natural resources to develop solutions that will be exportable and improve both local and UK productivity.  However, it is accepted that the CIoS LIS will need a review, to reflect the impact of COVID 19 on our economy.  There is a consensus locally (Local Authorities, LEP, business organisations) that the priorities outlined in the LIS are sound but that further focus on general business performance, Town Centre/High Street vitality and skills is required.  Our draft LIS (see below) therefore articulates the starting point of our recovery upon which we can build further measure to help support the levelling up agenda.

Through the work undertaken as part of developing our Local industrial Strategy it was identified that the businesses and economy of CIoS face a range of prolonged and distinctive challenges as outlined in the table below.  Post COVID 19, in addition to the immediate challenges caused by the pandemic, these key challenges remain in place and therefore addressing them alongside immediate recovery interventions is vital to our long-term recovery.

The number of businesses in CIoS in relation to our population is average; however, they are much more dispersed, providing fewer opportunities for peer-to-peer support, collaboration and knowledge transfer. Pre-COVID 19 the business churn rate was lower in CIoS than the UK average, with the highest business survival rates of all LEP areas over the last five years.  Digital infrastructure and connectivity are therefore a greater necessity than ever before and whilst our full fibre connectivity is far higher than the UK average and mobile 4G coverage is higher than the national average overall Superfast Broadband coverage is slightly below the UK average.  Therefore, there is a need to invest in full fibre coverage to improve speed and remove barriers to deliver full coverage of 4G and accelerated of 5G in rural areas.

With regards to cost analysis comparing the cost of local versus national delivery mechanisms, this is impossible to do without knowing the total cost to the various Government Departments (DEFRA, MHCLG, BEIS, DWP, MMO, HM Treasury) of delivering the current EU and other economic development programmes.  This information is not published and so any comparative analysis of the costs/benefits cannot be undertaken.  However, most commentators, think tanks and research would indicate that greater levels of growth are delivered by the devolution of decision making and budgets to local areas. We are also confident that subject to a significant simplification of the current compliance and audit regimes that are used to deliver EU programmes we can design a devolved delivery framework that is cheaper to administer than the current EU programme.

In terms of the benefit of a local approach under our Growth Deal CIoS was awarded “Integrated Territorial Investment” (ITI) status under the current EU programmes.  This was in recognition of our track record of delivery and experience of managing EU funds as well as an acknowledgement by Government that “Less Developed Region” require a different approach from the rest of England.  Extracts from the ERDF Operational Programme Document are useful as they help to explain why a localised approach can be beneficial and demonstrate that MHCLG (as the managing Authority for ERDF) have confidence is local delivery: -

• The CIoS ITI covers the entirety of the region (it is not limited to urban areas). One of the characteristics of the region is its lack of a single dominant urban centre; one of the disadvantages of its economic base is its peripheral and spatially dispersed nature. This explains, in part, why specific areas are not targeted in the ITI.
• The Cornwall and Isles of Scilly region faces social and economic challenges. Its peripheral location and relatively weak business base do not easily facilitate economic growth. The labour market is excessively dependent on seasonal, low-skilled employment. There is also a strong emphasis on developing social inclusion and the regional skills base.
• The ITI Strategy document notes that ‘national programmes can often have little impact in CIoS… a problem compounded by nationally driven commissioning and by the use of procurement and delivery models in the current programme which have not been bespoke, accessible or flexible.’[8] The ITI will allow the region greater control over the use of funds; this is considered to be important as a Less Developed Region.
• CIoS faces different development challenges than other areas in England, requiring bespoke interventions. The CIoS LEP and Cornwall Council were keen to secure the use of an ITI approach because it enables them to maintain an established approach based on good communications and a strong relationship with local fund beneficiaries. A secondary part of the rationale was that the amount allocated to the ITI by the ERDF and ESF Managing Authorities at the outset of the programming period cannot later be changed.
• The design process was led by Cornwall Council, in partnership with the CIoS LEP and other stakeholder organisations in the region. These actors were involved in negotiating a differentiated approach (i.e. using a regional ITI) based on the argument that region’s Less Developed Region status made it unique in England, and that a more localised and bespoke approach to funds delivery was appropriate. For example, in CIoS there is a stronger case for investment in transport than in other English regions. The Department for Communities and Local Government (DCLG), the Managing Authority for the England ERDF OP, was supportive of this argument for a regional ITI.
• The CIoS ITI strategy document also outlines its commitment to support the cross-cutting (horizontal) themes of equal opportunities and sustainability, in support of the pre-existing Strategy for Inclusion in Cornwall, and Cornwall’s Environmental Growth Strategy 2016-2065.
• The UK does not have an explicit national regional policy, and so the CIoS ITI does not link in with any pre-existing strategy at the national level. A lesson learned at the development stage of the CIoS ITI was the importance and value of close links and good communication with DCLG and DWP at UK national level.
• The most obvious point of good practice to date has been the early allocation of a substantial proportion of the ERDF budget. This is due in part to the long-term experience of Cornwall Council and the CIoS LEP, and also due to good communication with beneficiaries in the region.

2.               Local structures: what structures exists across the country and how does this compare across different regions? How do these different tiers work together to deliver local growth? What good case studies exist, and can lessons be learnt from poor collaboration or leadership? How should local structures support delivery of regional growth across England? Do regional or local structures act in the best interests of local priorities and stakeholders or act more as a delivery arm of central Government? What should local authorities do more or less of to achieve these aims? Where should government focus its post-Covid-19 levelling up policy to best support regional growth: English regions, core-cities, towns, Growth Hubs and LEPs?

During the Covid19 crisis Cornwall and Isles of Scilly demonstrated strong place leadership. Through the Leadership Board a coordinated response was put in place swiftly to contain the virus locally and to support communities and businesses. Nowhere in the UK has the economic shock resulting from Covid19 been felt harder than in Cornwall and Isles of Scilly (CIoS). The CIOS local economy has been impacted more severely than any other area in the UK due to the importance of the visitor economy (1 in 3 private sector jobs in CIoS are linked to the visitor sector), the high prevalence of small and micro businesses and above average levels of self-employed.

The crisis clearly demonstrated that local knowledge and a tailored response is far more effective than a centralised ‘one size fits all’ approach. During the lock-down period CIoS demonstrated our ability to come together as an area to pool intelligence around the impact of the lock down on local sectors and businesses, effectively lobby for government support and efficiently distribute support and disseminate clear guidance and information. This coordinated response continues in the reopening and recovery phase.

As well as being the largest rural Unitary Authority we are also the first rural authority to receive a devolution deal in 2015 on which Cornwall has been delivering a strong track record – independently verified by the Ministry of Housing, Communities and Local Government, as well as in the Warwick Economics evaluation for BEIS, due to come out this spring/summer. The Cornwall Deal has been a first step towards ‘closing the gap’ that characterises Cornwall’s position vis-à-vis national averages. By securing freedoms to design local policy solutions to the place-specific challenges of their rural and peripheral communities, Cornwall Council has delivered significant achievements, including crucial improvements to their transport infrastructure to better serve local need, the launch of a Growth & Skills Hub, and tackling the higher than average fuel poverty rate .

In setting guiding principles, the Government should prioritise devolved budgets, decision making and delivery to the local level to address regional inequality and variations in economic contraction. In this context “local” to us means Cornwall and the Isles of Scilly.  We therefore offer Government a model to test the role that further devolution to rural areas can play in the “levelling up” agenda.  The systematic bias in national policy and funding decisions toward cities can only be levelled up by targeting LEP areas, regions, towns and rural areas that are lagging behind and varying the policy approaches according to the differing nature of the local areas and their challenges. 

Whilst we recognise the challenges caused by overlapping areas and organisations in England we believe that (as Cornwall Council as a Unitary Authority was formed out of significant local authority reform in 2009, the fact that the Council for the Isles of Scilly is also a Unitary Authority and the fact that their coverage areas are coterminous with our LEP area, our Local Nature Partnership area and our Health and Wellbeing Board area) no further reform of the structures is  required. 

All of the above participate with other local place leaders in the Cornwall and Isles of Scilly Leadership Board which is our rural alternative to a Combined Authority and which we believe delivers the strong Place Leadership required to drive recovery.

We therefore believe that further devolution is key to addressing the levelling up agenda. The emergency response to COVID 19 has provided repeated demonstration of the effectiveness of local solutions over “one size fits all” central schemes, reinforcing well-rehearsed arguments for decentralising power and equipping local place leaders with the tools and levers to improve outcomes. It is vital that Cornwall and the Isles of Scilly secures the necessary powers and funding to drive forward our recovery, and our shared vision for renewal.  We need to get the geographical footprint right in order to effectively reduce disparities between regions. Our experience has clearly showed that Cornwall and Isles of Scilly has proven to be the right footprint to, on the one hand, capture regional disparities, while on the other being a big enough footprint for strategic planning.

Cornwall Council has gone on to establish an exemplary track record in using our existing devolution deal to deliver lasting benefits.  For example, Transport for Cornwall, a rural first for full integration of public transport journeys, has delivered more frequent, better quality and cheaper services.  Independent reviews have highlighted Cornwall’s strong place governance, with a unitary authority providing single democratically elected leadership for Cornwall alongside a Unitary Authority covering the Isles of Scilly.  Resetting the relationship between central and local government is vital with more responsibilities and budget devolved to local authority and/or LEP areas to support future resilience. Another example of where we have developed closer collaboration is the work already underway in the Health and Care sector to accelerate the training and development of nurses/care providers.

We bring to the table a strong ability to deliver a dynamic SPF investment programme. Based on our proven track-record of delivering on the Cornwall Devolution Deal, the CIOS Local Growth Fund and 20 years European Structural Funding programmes.  Key to our offer is that Cornwall Council propose to take responsibility for the SPF programme and become accountable body for delivery and a full contracting authority. CIoS LEP led the development of the original CIoS ESIF strategy in 2013. The review of this process by Government commented that “there was evidence that LEP consulted widely with local businesses, communities and stakeholders in developing the strategy”. The ESIF strategy was also endorsed by Cornwall Council and Council of the Isles of Scilly. We have followed a similar process to develop our Local Industrial Strategy that will form the strategic basis for the proposed CIoS SPF Delivery Framework.

In recognition of the exceptional challenges and distinct opportunities faced by CIoS and its status as a Less Developed category of region, Government agreed to the establishment of an Integrated Territorial Investment (ITI) intended to inform investment of ESI funds over the 2014-2020 programme period giving a specific territorial focus on CIoS. The ITI was established as part of the HMG Growth Deal Agreement with CIoS in 2014. The ITI itself is underpinned by the ITI strategy which builds on and replaces the ESIF Strategy developed by CIoS LEP.

In a devolved SPF delivery model we would take the opportunity of designing a CIoS SPF programme outside of EU rules to significantly simplify the programme architecture and deliver a programme that is experienced as less bureaucratic for project stakeholders and which is cheaper to run for central government than the current EU programme. The aim of the local governance arrangements is to put in place a decision-making board which takes effective and efficient decisions about how to allocate funding locally that are fully accountable to citizens of Cornwall and the IoS, transparent and which have safeguards in place to manage any potential conflicts of interests.  This would ensure that funds are allocated on the basis of fair criteria that ultimately will lead to growing prosperity for one and all in Cornwall and the Isles of Scilly.

3.                 Stakeholder engagement: how does each tier of regional or local government engage with delivery stakeholders (such as businesses, education providers, etc)? Do different tiers engage in different ways? Where are there examples of good practice? Do stakeholders believe the different tiers are effective and worthwhile to engage with? Do stakeholders consider certain tiers to be more of a constraint on growth as opposed to a delivery partner for growth?

Cornwall and the Isles of Scilly prides itself on the collaborative approach we take to stakeholder engagement and consultation.  Developed over 20+ years of being involved in the design and delivery of EU programmes we have always adopted a bottom up and collaborative approach.  Our unitary status (Cornwall Council and the Council for the Isles of Scilly), commitment to double devolution where appropriate (to Town and Parish Councils) and our co-terminosity with the Cornwall and Isles of Scilly Local Enterprise Partnership helps to facilitate this approach and as can be seen in other sections of this report the development of the Cornwall and Isles of Scilly Leadership Board is a way of involving other place leaders in a co-ordinated approach.

Cornwall Council has a strong culture of engagement with its stakeholders and residents. This was noted in an independent evaluation undertaken by Warwick Economics and Development Ltd (WECD), commissioned by MHCLG, BEIS and the Cities and Local Growth Unit to examine the internal institutional processes, progress and governance of authorities across England with a devolution deal. WECD visited Cornwall in March 2019 and provided initial high-level feedback stating that “Cornwall Council demonstrated a strong governance model, a culture of continuous improvement, a devolution programme that was well organised and comprehensive, transparency of officers, Members and external representatives, and commitment by senior management and political leadership”.  Early indications of the research findings were presented to Cornwall and the Isles of Scilly Leadership Board in March 2020, which showed that Cornwall proved to be the exception in relation to public and business understanding and perceptions of key local governance roles and concepts that are part of devolved institutions.

On 19 June 2020, the Cornwall and Isles of Scilly Leadership Board formally endorsed our proposed approach to developing a shared vision for ‘The Cornwall We Want’ to inform our recovery and renewal plans; and building a strong ‘yes for Cornwall’ case for devolution of the powers and funding needed to deliver those plans.  Since then extensive partnership consultation has taken place to consider and steer our priorities for devolution. We are currently preparing a renewed case for significant fiscal and legal devolution that will underpin our developing vision for Cornwall as we drive economic recovery and renewal post crisis.  There is a strong fit between the Government’s objectives and Cornwall’s offer.

Our case for investment as a levelling up priority is compelling, as one of the least developed regions in Europe; worst affected by the economic impacts of COVID 19, and at greatest risk if a post-Brexit trade deal is not reached; and we present a significant opportunity in the Race to Zero due to the region’s natural capital, strength in green and marine technologies, to decarbonize the (national) economy and achieve net zero commitments. We continue to work with Government to build support for a second devolution deal in Cornwall, ahead of the publication of the White Paper on Devolution and Local Recovery expected in the autumn.

Through Britain’s Leading Edge we met Treasury officials at the beginning of July to test support for our Net Zero Evergreen Infrastructure Fund proposal, and at the end of July we welcomed the Minister of State for Regional Growth and Local Government during his two-day visit to Penzance, Falmouth, Newquay and Wadebridge to see first-hand the economic impact of Covid-19 on Cornwall’s economy and the steps we would like the Government to take to support local businesses. In addition, Cornwall has led the establishment of a range of networks designed to amplify our voice with Government:

• Intermediate Body Network: established by Cornwall Council’s Intermediate Body team in 2018, this brings together the 11 authorities with Intermediate Body status giving them local control over how European funding is used. Collectively we represent 47% of England’s GVA and have been recognised as a statutory consultee to the Government’s long-awaited proposals for a Shared Prosperity Fund. Together we are calling for shared principles, most notably no loss of local control in the arrangements for replacing European funding.
• Less Developed Regions Network: established by Cornwall Council’s Economic Growth team in 2019, this brings together the British local authorities representing Less Developed in Europe - on latest data, five regions, up from two in the current round of European funding.  Together we are calling for our areas to be no worse off under the arrangements for replacing European funding. 
• Britain’s Leading Edge: established following a mandate from the Leadership Board in early 2019, this brings together upper-tier authorities that have no major cities. The regions meeting our criteria represent 44% of the country’s land mass, 11% of the population and 8% of GVA – equivalent to the English Core Cities. Together we are calling for equality of consideration and infrastructure investment in peripheral areas, making a strong case for our potential to contribute to a resilient national economy (e.g. with secure supplies of clean energy to power the future economy). In latest discussions, civil servants have agreed to include Britain’s Leading Edge in their stakeholder engagement on the imminent Devolution White Paper.  
• Great South West: established by the relevant LEPs with considerable support from Cornwall Council, this brings together a powerful alliance of business leaders, LEPs, universities, colleges and local government. With a population of over 3 million and an economy of £64 billion the potential of our regions can be unlocked through this collaboration.

Outside of formal structures we also use a range of collaborative tools and processes to inform our strategies and policy decisions.  Examples include the following: -

• UK SPF Steering Group – Chaired by a Private sector LEP Board member this group brings together partners who have been involved in the delivery of previous EU programmes in order to share their experiences and thoughts for how the UK SPF can be delivered.  Membership of the group includes the Cornwall Chamber of Commerce, the FSB, officers from Cornwall Council and the Council for the Isles of Scilly, the University of Exeter, Falmouth University, the chair of one of our Local Action Groups, Cornwall Neighbourhoods for Change, Cornwall Association of Local Councils and other community representatives.
• Local Industrial Strategy - The CIoS Industrial Strategy was developed by the CIoS LEP in collaboration with local partners and stakeholders and reflects shared ambitions for the future of the CIoS economy. It has been built on a robust and open evidence base that can be used as a live document for all stakeholders in conversation with government, and for decision making around investments and the economy in the future.

The commitment to collaboration and the value we derive from it has been recognised locally but also by MHCLG.  In developing the case for our ITI they stated that: -

“The most obvious point of good practice to date has been the early allocation of a substantial proportion of the ERDF budget. This is due in part to the long-term experience of Cornwall Council and the CIoS LEP, and also due to good communication with beneficiaries in the region”

Whilst there is always room for improvement the fact that we have unitary structures covering 100% of our geography our upper tier authorities are seen as key delivery partner for growth.  By actively engaging in and resourcing the strategy development process, acting as lead and/or accountable body for delivery and/or providing match funding for delivery we can demonstrate our credentials as credible partners for both Government and local stakeholders.

4.                 Sustainable local economies: how could a green economic recovery stimulate local economies and embed upskilling at a regional level? Which tiers are best placed to provide the leadership of local net zero and skills-based priorities? Should leadership responsibilities be separate from delivery responsibilities?

The economic shock caused by Covid19, which the Office Budget responsibility (OBR) estimates as the largest ever shock to the UK economy[9], has hit some areas in the UK worse than others. The Cornwall and Isles of Scilly (CIoS) economy has been impacted more severely than any other area in the UK due to the importance of the visitor economy, high prevalence of small and micro businesses and above average levels of self-employed. The UK SPF will play a crucial role in supporting areas across the UK to bounce forward following this economic shock. A SPF investment into CIoS is needed more than ever and a devolved SPF programme will give a significant boost to our economy at a crucial time when it is needed the most. As the SPF will replace EU funding[10] and be one of the government’s main policy instruments to deliver levelling-up across the UK. It needs to be of sufficient scale and scope to make a difference. A series of reactive, one-off competitive opportunities will be ineffective at tackling deprivation and achieving prosperity. 

We strongly believe that with the right focus on a fair and green recovery CIoS can not only pull through the Covid19 crisis, but bounce forward stronger, greener and more inclusive than before.  We also firmly believe that devolution of programme design, budgets and decision making is the most effective way of delivering sustainable local economies.  Local stakeholders are best placed to understand the nuances of their local economy. 

As evidenced in section 1 many independent commentators have demonstrated that the current centralised approach to socio-economic policy/delivery has not worked and that regional inequalities are increasing.  Therefore, if we continue this model these inequalities will inevitably continue.  It is therefore time to “recast the mould” of economic development and let local stakeholders drive the changes that are necessary to deliver the levelling up agenda in their areas by driving placed based inclusive growth and improved high street vitality. 

Our UK SPF governance model (outlined in section 2 above) demonstrates that it is possible to have leadership and delivery responsibilities in the same place so these should not be separated in our view. In addition, we would propose to adopt a model of double devolution to locally based groups such as Local Action Groups and Town Boards where appropriate.  An example of local leadership and delivery in the same place would be the fact that in January 2019 Cornwall Council declared a climate emergency, recognising the need for urgent action to address the climate crisis and restore nature. Work is now on-going within Cornwall Council to deliver the changes required within our own responsibilities/business model and with external stakeholders and private sector organisations to encourage them to make the necessary changes as well. 

The CIoS Draft Local Industrial Strategy shares the Councils ambition for carbon neutrality by 2030.  Improved environmental performance is also enshrined in the Great South West prospectus with an ambition to be the first net zero carbon region in England.  Our distinctive natural capital is the fundamental asset that shapes the people and economy of CIoS.  Our landscape and habitats, temperate climate, fresh air and clean water and the wildlife on both land and sea are intertwined with our sense of place and therefore recovery plans must deliver environmental growth as a key priority for any activity. 

Our natural capital provides CIoS with food and medicines, energy, flood defences, construction materials and other strategic minerals (e.g. Tin and Lithium) in addition to providing recreational spaces for residents and visitors. Three-quarters of CIoS residents visit greenspaces at least once a week and visitors to CIoS cite the landscape as their number 1 reason for their trip.

We believe that the low-carbon transition and improved efficiencies will create new global market opportunities and drive productivity in the existing business base.  One of the benefits of the COVID 19 lock down has been proving to businesses and employees that commerce and “work” can continue unabated via home working and this is something that we wish to continue and expand as part of our recovery package.

A recent report by Smart Growth Analytics Ltd regarding the contribution made by Home office Professionals estimated that “Professionals who work from home, whether business owners, self-employed or employees, are highly competitive and productive workers and make an estimated GVA contribution in excess of £100 billion per annum to the national economy of England. This represents some 6% of national GVA with just 4.4%, 1.3 million, of its workers”.  It also reported that “CIoS was ranked in the top 16 LEP areas by percentage of home workers in the resident population” and concluded that “Growth in Home office professionals has helped drive national economic growth and will continue to make a significant contribution over the next 20 to 30 years”.   

Post COVID 19 if more people can choose to work from home, where they choose to locate their home base becomes more to do with where they want to live rather than where they currently reside.  The quality of life that CIoS can offer could be an important factor in their decision-making process.  Conversely if employers are more confident in having their employees working from home undertaking national roles from CIoS opens an increased opportunity for the existing residents of CIoS to fulfil these roles where traditionally they would have had to move to do so.  However, we also recognise that homeworking is not an option for everybody, so we must consider the future off all work in our plans. 

CIoS has some unique and unrivalled energy resources and a track record of driving and delivering low-carbon innovation and natural solutions. There has been a transformation of our energy sector that now provides around 37% of our electricity from renewables but progress has stalled and without intervention barriers will stop CIoS from achieving carbon neutrality. Economic opportunities will be missed if CIoS does not build on its successes and fail to keep products and materials in use.  Without intervention the environmental challenges of CIoS will increase; more homes and business will be at risk of flooding, the coastal paths will erode, the soil quality will degrade, more areas will fail air quality standards and habitats will continue to decline. Long-term damage would affect access to food and clean water, the ability to attract visitors and provide recreational spaces, and opportunities to protect the communities of CIoS.

The importance of skills in the growth agenda and to people’s social mobility and overall inclusive growth cannot be underestimated, having the key and necessary skills opens opportunity for many, increases economic productivity and changes individual life prospects. CIoS has the lowest proportion of working age people (aged 16 to 64) for any LEP in England at 58.4% so measures designed to get as many of these people into quality employment as possible is vital to our future economic prospects.  We believe the Government needs to create opportunity and stimulate the economy through a green economic recovery that has employer led delivery embedded at local level.

The United Kingdom has the opportunity to invest wisely in a variety of areas in order to create both skilled jobs and meet its net zero climate commitments.  Areas such as low carbon retrofitting of the UK housing stock, digital infrastructure (ultrafast broadband, 4G & 5G) and renewable energy generation (floating offshore wind, deep geothermal) provide opportunities for growth that can be realised quickly.  For example, CIoS can increase the export of green energy quickly if grid constraints are removed. 

A report by the Energy Efficiency Infrastructure Group estimates that 150,000 skilled and semi-skilled jobs would be created if the government committed to upgrading the energy efficiency of the entire UK housing stock to an EPC rating of C by 2030[11]. Such an investment would also have a wider effect on areas other than employment seeing lowering household costs, fewer winter deaths, protecting the environment and boosting sector supply chains.

Creating new jobs is one thing but there is also a need to reskill and upskill the existing workforce so that they can help drive productivity gains in the businesses where they are employed. The challenge of upskilling the UK workforce is significant and requires a multifaceted approach involving; back to work programmes (e.g. wage subsidies and apprenticeships), mentoring, work-based training (linked to the skills required to do the job rather than just the achievement of qualifications), apprenticeship schemes, graduate support programmes; skills hub support networks and a significantly improved careers offering for those under 16.   It is therefore a significant concern for Cornwall and the Isles of Scilly that the UK Shared Prosperity Fund (the replacement for the current EU Programmes ESIF, RDPE and Fisheries) has yet to be consulted upon or announced.   From a skills point of view the loss of the current ESF funding leaves skills investment and career support programmes with an uncertain funding future at a time when it could be argued it is most required.

The COVID 19 pandemic does not alter CIoS dependence on trade with the EU. In 2017 55% of CIoS exports went to the EU market compared to 48% of exports across the UK. The COVID 19 crisis has exposed some of the vulnerabilities of local exports, including export of fish and shellfish to the EU which has been decimated by the lock down. It is important that this greater understanding of export patterns is translated into a greater emphasis on local supply chains. Trade with the EU is always going to be important to the UK economy and as such should be continued within the context of a comprehensive free trade agreement between the UK and the EU. Brexit based on WTO terms would present a significant shock to the CIoS economy at a time when recovery will only just have started.

5.                 Targeted regional investment: how could ‘shovel ready’ growth projects in England drive local growth and jobs? How could clustered R&D investment support local growth? How should priorities be agreed across the regions?

The productivity challenge in CIoS is multi-faceted, requiring orchestrated long-term action across the foundations of productivity to deliver the right mix of interventions – there is no ‘one size fits all’ solution to lifting productivity or “levelling up” the economy.  Shovel ready projects have a place in helping to drive local growth and to create jobs, but they should not be funded instead of or in isolation to wider and longer-term actions designed to address some of the more challenging or structural issues facing local economies.  For example, in order to deliver a “shovel ready” building on a specific site ignores the fact that it could have taken many years of consultation, master planning, land decontamination and site servicing to get to the point where buildings can be built.  

Aligning capital, revenue and skills support at project/business/place level is key to success and this is best achieved by devolving decision and delivery to local level so that “shovel ready” projects can be accelerated, and longer-term projects can be developed.  Analysis of our economy undertaken as part of our work on our Local Industrial Strategy identified four broad groups of businesses that share common economic characteristics and therefore also fall into groups with regard to actions to improve productivity, recover and grow.  See table below.

Post COVID 19 the four-broad groupings identified above will remain but in the immediate/short term there are businesses within more traditional sector classifications that have been hit harder by the COVID-19 crisis than others.  Recovery plans need to be localised and flexible enough to take this into account. For example, there is a real possibility that many of our hotels, restaurants and attractions that have normally operated on an all year-round basis may well decide to close at the end of October 2020 and make the vast number of staff they employ redundant.  This would protect their cash position as most breakeven or trade at a loss during the winter period.  This could in turn result in an additional rise in direct unemployment as well as the knock-on impact to businesses that trade with them in their supply chains though to April 2021.

By working with key businesses that are already best in class and capable of growth, developing new high value sectors and businesses that link to our key strengths alongside redoubling our efforts to work with the existing businesses in our foundational economy to achieve best in class performance, we can accelerate the recovery period considerably.  Ignoring our existing business base will only continue to act as a drag on our economic performance and reduce the effectiveness of our recovery plans.

Therefore when considering a chance to reset the economy and create a ‘new normal’ that is resilient and addresses broader government priorities and global challenges, the focus should not be on certain sectors but on the challenges, goals and vision for the future economy with targeted support aimed at those businesses that have been affected most by the pandemic (e.g. an extended Job Retention Scheme or some form of wage subsidy support to take on new staff) as this would keep people employed and reduce the demand on Universal Credit.

We therefore believe that rather than Government focussing on specific sectors at national level they should focus on the Five Foundations of productivity and allow local areas to define how to deliver them in their areas.  Where relevant regional actions and activities can be identified and delivered through regional structures such as the Great South West or the Western Gateway.  Cross LEP working with other LEPs that are not located in the SW may also be relevant and should be encouraged where there is mutual benefit.  The UK SPF could facilitate this by offering higher grant rates for projects that involve more than 1 LEP area.

Recent evidence and analysis undertaken by Ash Futures has questioned previously long-held views that differences in overall productivity between areas can be explained by differences in industrial mix, suggesting that differences in productivity performance relate to something more than simply industrial structure. An important issue highlighted in their report is that the variance of productivity within industries is much greater than the variance across industries.

Analysis from the Office of National Statistics has shown that it is the differences between average firms’ productivity within industries that has the most significant effect on aggregate regional productivity differences. They also estimated that if CIoS had similar levels of physical connectivity to the HotSW LEP area (assuming a centre point of both areas) its productivity would increase by c10%.  As we cannot change our geography, we have to change the way we deliver interventions designed to improve productivity and growth to ensure that they are inclusive and re-distributive by design.

6.                 Regional funding: how should the UK Shared Prosperity Fund be specifically targeted to replace EU Funding and address regional inequality? What role should local structures play in allocating funding to best achieve regional growth? What role could the British Business Bank have in the post-Covid-19 levelling up of regional economies?

Yes, the UK SPF should specifically replace EU funding (ERDF, ESF and Socio-economic elements of EAFRD and EMFF) and ensure that no area is worse off as a consequence. For CIoS this means an investment of £700m over the next 10 years. The SPF must have a focus on levelling up of regional inequalities rather than productivity gains across the UK as a whole. Within the UK there is a marked difference in economic performance at regional/local level and even before the COVID 19 pandemic these were increasing.  The maps below indicate the areas of the UK where the biggest need (pre-pandemic) exists to “level up” the economy.  

In the context of financial allocations to different areas of England (noting that allocations to devolved administrations will be subject to different decision making processes) we would advocate that whilst every area of England will be able to access the SPF those areas furthest behind should receive higher per capita allocations so that they have more resources to target at the interventions required in their areas. The SPF should not be allocated on a competitive basis, but rather based on a needs basis that takes into account individual LEP areas starting point and need for levelling up.  

Government have made a commitment that no area should “be worse off as a result of Brexit” and therefore the SPF should ensure that areas such as CIoS are not disadvantaged in any methodology used to allocate available funding in England. In GVA per head terms the chart below also demonstrates the need for continued intervention to help “level up” our economy. 

Whilst COVID 19 will have had a negative impact on every area in the UK those areas that were furthest behind before the pandemic are likely to be hardest hit and take longer to recover post pandemic.  The “trickle down” effect of promoting growth at national level in the hope that this will benefit all areas equally has been proven not to work and a different approach is now required. 

As outlined in the Conservative manifesto and reiterated by Government Ministers and the Prime Minister in an interview with the BBC the investment required to help “level up” should happen through an adequately funded and appropriately devolved UK Shared Prosperity Fund (UK SPF). We look forward to the forthcoming Devolution White Paper that will set out the details of this important shift. While newspaper headlines have focused on a binary North/South divide, we are reassured by the Prime Minister’s personal assurances during Prime Minister’s Question time that Cornwall will have its EU funding allocation replaced via the SPF in monetary terms that leaves us no worse off, and that Cornwall will receive additional investment for infrastructure and health[12].

As the current EU regional and rural development/cohesion EU programmes come to an end the significant funding they invest to stimulate the levelling up of economies is at risk and must therefore be replaced on a like for like basis in focus (raising productivity, skills, inclusion and growth) and in budgetary terms so that their work can continue.  In 2017 Cornwall and the Isles of Scilly’s productivity was 70% of the UK average[13] and this is in the context of CIoS receiving EU funding as a Less Developed Region.

Great strides have been made for the CIoS economy including the rollout of superfast broadband, investment in a higher education presence, skills and business support programmes and state of the art workspace. However, significant challenges remain in terms of improving productivity and to address the issue of how to foster inclusive growth to the benefit of one and all in CIoS.    Our clear ask is therefore for our current EU programmes (ESIF, RDPE, EMFF) to be replaced by a UK SPF that invests at least £700 million into CIoS in a fully devolved fund over the next 10 years. This UK SPF investment must be specifically targeted to replace current levels of EU funding that are aimed at addressing regional inequality within the UK and should be additional to any mainstream government funding for infrastructure such as roads, hospitals, schools and other Government funding (i.e. they must deliver additionality). 

In addition, the UK Governments recent decision to not participate as a third country in the 2021 to 2028 EU INTERREG programme will stifle regional co-operation with other areas of the EU and possibly other regions of the UK.  Regional Co-operation must therefore be eligible for UK SPF support or an alternative funding mechanism should be created to enable UK regions to partner with EU regions for mutual benefit. 

We believe that COVID19 has exacerbated regional inequality and that the crisis has had a disproportionate negative impact on CIoS.  This conclusion is backed up by an analysis conducted by Grant Thornton’s Place Analytics tool which demonstrates that in their COVID19 vulnerability index Cornwall is ranked as the Local Authority area most at risk of a severe economic downturn.

It is estimated that quarterly GVA is down 34% in Cornwall[14] and that as many as 72,800 jobs[15] are at risk of being lost due to lock down. This constitutes 27% of all jobs in Cornwall.   Universal Credit numbers for March to May 2020 confirm this worrying picture with an overall increase of 91% during this period.  JSA claimants have gone up by 120% in the same period.  Cornwall and the Isles of Scilly has also been disproportionally impacted due to the high proportion of self-employed (23% of total workforce compared to 16% nationally).

Our geographic location, with sea on three sides of Cornwall and four sides of the Isles of Scilly, a dispersed settlement pattern and no agglomeration benefit of a City Region will also require us to develop bespoke approaches.  The significance of tourism and the wider visitor economy has also exacerbated the negative impact of the lock down. It is estimated that in Cornwall 1 in 3 private sector jobs are linked to the visitor economy and on the Isles of Scilly this figure is higher. Some factors that affect productivity are more difficult to address. For example, as would be expected, there is a relatively strong association between connectivity and productivity.

The estimated loss to the tourism sector in Cornwall by the end of June 2020 as a result of COVID 19 is £630m. This figure is for accommodation and visitor attractions only and does not consider the strong linkages between the tourism sector and the wider visitor economy.  The COVID19 crisis has clearly demonstrated the importance of a strong understanding of the local economic context, the need for responsiveness at a local level in order to support people, communities and businesses and has highlighted the importance of future UK SPF investment to be devolved and agile enough to respond to sudden shocks to the economy.

Another clear lesson from the COVID19 crisis is that the repurposing of existing EU funding (e.g. Re-opening the high street fund) whilst welcome, has been clunky and slowed down by centralisation of these funds and the diverging approach taken by different Managing Authorities.   Post-pandemic economic recovery must provide a supportive environment that not only re-frames the narrative around ‘the central and the local’ but grants regions a greater level of control over their own policy making and development.

Initiatives such as Tourism Innovation Zones (an ask contained in the Great South West Prospectus), Energy Innovation Zones (focussed on our existing Enterprise Zones and other key locations in order to take advantage of planning simplifications) can be accelerated with increased Government Investment. 

Our Spaceport proposal is of national significance and therefore should be seen as part of wider national space related infrastructure rather than a local initiative. National Government investment (as a shareholder or equity investor) should be reserved for nationally important businesses, many of whom will have satellite facilities across the UK.  Local areas should be tasked to identify any strategically important businesses to their area that may require Government investment and then through dialogue with Government decide whether equity/shareholding investment is warranted at local or national scale.

Utilising the financial acumen of organisations such as the British Business Bank at national level and organisations such as the South West Investment Group at local level will be key as they are experienced in managing the financial arrangements and are FSA approved.  Government capital support to these organisations for them to fulfil this function will be required.

The UK should also take the opportunity to review state aid rules, including a renewal of the regional aid map and a greater use of regional state aid block exemptions for those areas that are furthest behind as a tool to promote levelling up (in addition to higher per capita allocations and grant rates). If this is implemented (as it was under previous EU programmes e.g. 2000 to 2006 Objective One Programme) it provides these areas with the ability to increase the scope and scale of interventions alongside their additional per capita financial allocations. 

Future alignment with EU state aid rules will also be important to ensure that a level playing field exists between UK and EU businesses. The COVID 19 pandemic may affect state aid in the terms of economic recovery in the EU, and the UK needs to adapt its own state aid rules to coordinate with changes in EU.

7.                 Project Speed: Project Speed will bring forward proposals to deliver government’s public investment projects. How should Project Speed identify and distribute growth opportunities into communities across the country to best achieve its levelling up agenda? What should the balance be between Whitehall decision making and local decision making? Do we have the capacity and capabilities at local and/or regional level to do this work on behalf of central government? What core/guiding principles should the Government adopt/prioritise in its recovery package, and why?

The Centre for Cities report on levelling up concluded that “The different nature of the challenge in each place means that the policy approach must also vary”.  The IMF stated that “Regional inequality[16] is one of the key factors that determine the UK’s overall productivity performance and growing inequality indicates to us that regions are not supported to deliver on their full potential. 

For a prolonged period covering various different government administrations decision-making and funding has been largely concentrated in the urban areas of the UK, primarily within London. This is a key driver of regional inequality. The OECD singles out the UK as the most centralised country in the Western world[17], while the UK2070 Commission[18] and OECD[19] point to regional inequality in the UK being significantly larger than comparative countries.

A collaborative publication led by Cornwall Council entitled ‘Britain’s Leading Edge’[20] also shows that that there is a systematic bias in national policy and funding decisions toward cities – referred to as a ‘policy corridor’ (see map) – that in turn deprives more rural regions of investment and thereby limits their ability to contribute fully to the future national economy. In this context, Cornwall and the Isles of Scilly is not currently delivering its full potential and a dedicated investment through the UK SPF is needed. 

While newspaper headlines have focused on a binary North/South divide, we are reassured by the Prime Minister’s personal assurances during Prime Ministers Question time in January 2020 that Cornwall will have its EU funding allocation replaced via the SPF in monetary terms that leaves us no worse off, and that Cornwall will receive additional investment for infrastructure and health[21].

The immense productivity gap that currently exists between the prosperous South East of England on the one hand and the rest of the country on the other must be therefore be levelled-up by investing in the LEP areas and regions that are currently lagging behind.  We also suggest that higher per head allocations are targeted at those areas that are furthest behind in order to provide greater resources to support the levelling up of these areas.  In addition, Government must recognise that for those areas that are outside the agglomeration impact of a city region the need for an alternative to the current “trickle down” policy environment is paramount.

In setting guiding principles, the Government should therefore prioritise devolved budgets, decision making and delivery to the local level to address regional inequality and variations in economic contraction. In this context “local” to us means Cornwall and the Isles of Scilly and whilst we recognise the challenges to Government caused by overlapping areas and organisations in England we believe that the co-terminosity provided by Cornwall Council, the Council for the Isles of Scilly and the LEP area is unique and should be recognised as such.

As described earlier in this response the Cornwall and Isles of Scilly Leadership Board, which is our rural alternative to a Combined Authority, is in place, functioning and delivers the strong Place Leadership required and enables us to offer Government a model to test the role that further devolution to rural areas can play in the “levelling up” agenda. 

We therefore believe that further devolution is key to addressing the levelling up agenda and that we can deliver a balance between Whitehall decision making and local decision making that will deliver better outcomes for all.  Through our experience of delivering 20 years of EU programmes, the only rural devolution deal and Local Growth funding through the LEP we are confident that we have the capacity and capabilities at local level to do this work on behalf of central government.

By empowering local and regional government to deliver local growth that would be of national importance provides an opportunity for local economies to make best use of local resource, strengths and opportunities whilst also benefitting the UK economy. For example, Floating offshore wind (FLOW) is amongst the quickest growing renewable energy technologies in the world, with a potential market at least double that for conventional offshore wind. As yet, there are no FLOW world leaders. Cornwall & Isles of Scilly Local Enterprise Partnership (CIOS LEP) has been leading a regional initiative to build-out FLOW in the Celtic Sea, including through the development of a Celtic Sea FLOW Regional Business Plan with a roadmap of projects and an ambition of 2.5GW in the Celtic Sea by 2030. 

CIoS are well equipped to deliver local growth as set out above. Local decision making and autonomy led to investments, that would not have ordinarily been made under the current EU programme, into two geothermal projects. These investments will hopefully deliver direct local and international benefits and indirect national benefits associated with the production of low carbon heat and power, and now related to the sustainable extraction and processing of lithium evident in the geothermal waters that flow beneath Cornwall.

Ministers Simon Clarke (MHCLG) and Paul Scully (BEIS) met South West LEPs on 22 May 2020 and confirmed the Devolution White Paper will focus on levelling up regional inequalities through devolution to non-metropolitan areas and Simon Clarke MP reiterated that devolution to rural areas was also a key consideration in his recent visit to Cornwall at the end of July 2020.

The economic case for CIoS to be one of the areas targeted for “levelling up” support is outlined earlier in this response and so does not need repeating here.  However, it is important to reiterate that “levelling up” in an England context is much more than just a North/South divide.

Encouragingly, the Government remains committed to publishing its Devolution White Paper in the Autumn of 2020 and we urge Government to reset the relationship between national and local Government in this White paper with increased levels of devolution (budget and decision making), especially to non-metropolitan areas such as CIoS. It is therefore vital that CIoS secures the necessary powers and funding to drive forward our recovery phase.

The emergency response to COVID 19 has provided repeated demonstration of the effectiveness of local solutions over “one size fits all” central schemes, reinforcing well-rehearsed arguments for decentralising power and equipping local place leaders with the tools and levers to improve outcomes. It is vital that Cornwall and the Isles of Scilly secures the necessary powers and funding to drive forward our recovery, and our shared vision for renewal.  We need to get the geographical footprint right in order to effectively reduce disparities between regions.

The changes made in response to the crisis, such as reduced travel, have shown to have a major positive impact on the environment, air quality and global Green House Gas emissions.  Many people and businesses have quickly responded to the crisis, adapted and diversified in ways that many thought impossible only a few months ago.  IT systems have been installed and work patterns made more flexible, to enable huge numbers of people to work from home and students to take part in online lessons. Recovery provides an opportunity to build on those positive changes, keep hold of good practices and to continue the trajectory to Net Zero.

It is becoming increasingly clear that Cornwall and the Isles of Scilly faces ongoing significant economic challenges as a result of the COVID-19 pandemic, with the scale of the challenge yet to be fully apparent. Evidence from local, regional and national research demonstrates that our economy has been impacted more severely than any other area in the UK due to the importance of the tourism sector and the high prevalence of small and micro businesses and self-employed. The UK SPF will therefore play a crucial role in supporting areas across the UK to bounce back from this economic shock.

Specifically, our UK SPF delivery model will contribute to “Project Speed” in the following ways: -

• No gap between EU Programme delivery and delivery funded by the UK SPF will ensure that momentum is not lost when the period for new approvals under the current ESIF programme comes to an end at the end of 2020.  This will accelerate delivery.
• A simplified and less bureaucratic application process will be more business friendly and cheaper to administer that the current EU programmes.  This will increase engagement by the private sector and reduce the cost of delivery to the taxpayer.
• A focus on outcomes rather than outputs will deliver greater benefit.  This will increase the value for money of interventions.
• Using existing and well-established structures and experienced staff.  This will accelerate the transition from the old to the new funding environment and provide useful lessons to share with other areas of England.

End

David Rodda MBE

Economic Growth Manager

Cornwall Council

August 2020

Appendix 1 - COVID 19 Impact evidence

In order to gain an early understanding of the impact of COVID-19 and the social distancing measures put in place by the UK Government. The Cornwall and Isles of Scilly LEP undertook an online survey of businesses. As of 9 May 2020, there had been a total of 625 responses to the survey. The sample of responses was made up of mostly sole traders and micro-sized businesses with 69% of the sample having four or less employees. All businesses which responded, apart from 1, reported at least some disruption from COVID-19, of the businesses that responded, 92% said that there was a significant impact thus far due to COVID-19. This initial analysis pointed to a very significant impact on the majority of the 23,795 enterprises and 28,045 workplaces across Cornwall. 

Figure 1: Main Operation/Sector (self-identified) of Businesses Who Responded

Findings

Businesses identified the top three impacts as: reduced sales/bookings (86%), cashflow issues (73%) and travel restrictions (31%). A small number of businesses responded at the time stating they had seen a positive impact on sales due to COVID-19 driven by increased demand (2%). The warning signs were clear the vast majority of businesses were experiencing significant trading impacts.

If the lockdown and ongoing trading situation had continued this way for six months, then 86% of the businesses who responded stated they would not have been able to survive. Just under 4% of businesses at the time said that they could survive indefinitely. It remains unclear how many businesses were able to survive the initial lockdown period of 7 weeks, where only going out for food shopping, medicine or exercise were permitted. The lockdown period for many businesses was far longer than this. Non-essential retail was closed for a period of 12 weeks and hospitality a total of 14 weeks and 5 days.

Around 21% of companies surveyed had to laid off staff between the beginning of the outbreak and the early weeks of the lockdown. Many organisations were forced to reduce staff hours with those on zero-hour contracts seeing significant decreases in income. This was reflected in the survey with 47% of business reducing hours during the first phase of the UK wide lockdown.

Of the businesses who laid off staff during this initial period, the average number of employees laid off was 4 per business and totalled 1136 jobs. It is worth noting that survey was published before the government announced the Coronavirus Job Retention Scheme and many businesses chose to furlough staff stemming the level of job losses; it is however clear from the small sample size of the survey, the level of job losses across Cornwall in the initial period of uncertainly was significantly higher than the survey figure.

Figure 2: Q2 COVID-19 Business Survey - Impact on Businesses in CIoS in May 2020, Cornwall and Isles of Scilly LEP

The Cornwall Council evidence paper “COVID-19 The Impact on the Cornish Economy” of the 15 May 2020 attempted to estimate the impact on Cornwall’s Economy of the COVID-19 lockdown and pandemic.

The report contained the following estimates drawn from a number of sources:

• Using the ISER research outcomes, it was estimated that Cornwall could experience potential net job losses of 72,800 as result of COVID-19 (27% of Employment). (Employees – 58,700, Self-Employed – 14,100). Whilst the Royal Society of Arts predicted that 66,878 jobs in Cornwall were at risk, equal to 31% of the sectors covered by the research.
• Assuming that changes in output also mirror changes in employment as the ISER analysis suggests the estimated potential loss to Cornwall’s GVA was predicted to be £1,984 million or 22% of total annual output.  Whilst the Centre for Progressive Policy analysis forecasted that GVA will decline by 34% in Cornwall for Q2 2020.
• The Centre for Towns found Newquay as the most exposed town in England in Wales in terms of sectorial impact from COVID-19, with 56.2% of employees working in shutdown or at-risk sectors. Other towns highlighted included St. Ives, Penzance, Falmouth and St. Blazey. The research also identified St. Blazey as the Cornish town with the highest economic exposure to COVID-19, ranked 8 out of 805 in England and Wales.
• Using McKinsey research, it was estimated that 60,900 employees in Cornwall or 28.5% of the total may have be furloughed in May and 65,000 jobs may be at risk.

As the crisis has progressed the impact on the economy has become clearer. As is often the case there is a lag in statistical releases which hasn’t allowed for real time analysis of the current economic situation. Data is however beginning to allow us to retrospectively analyse the impact of the initial lockdown on Cornwall and the ongoing impact in the labour market.

Spending

Work undertaken by Tortoise Media looking at spending has been invaluable in providing an ongoing snapshot of the economic impact of the lockdown especially in the absence of any other indicators. Whilst this weekly analysis has now stopped the last release of data provided evidence of a slow uptick in consumer spending (see table 1).

Table 1: Percentage Change in Sales Comparison Week Ending 14 April 2020 vs 22 June 2020 Across Cornwall, Tortoise Media 2020.

As you can see from table 1, whilst drops in consumer spending compared to last year were not as severe during the week ending 22 June as they were in week ending 14 April. Many towns in Cornwall were still experiencing significant drops in expenditure. The majority of Cornish towns had moved up the rankings and were experiencing higher impacts relative to other areas than before.

Data has also been released looking at the impact on monthly sales by MSOA. This data is from the same source as the Tortoise Media Analysis and looks at total sales linked to geo-tagged consumer-facing merchant IDs for active debit card customers in England and Wales. This data accounts for between 12%-27% of consumer spending in a specific area so gives an indication of the pattern of sales but it doesn’t cover the full sales universe in each MSOA[22].

Figures 3 and 4 show a similar pattern to table 1 with the majority of Cornwall seeing a less severe impact on sales in June compared to April the period of severe restrictions. Some areas are seeing increases compared to normal levels of spending driven by very high percentage increases in grocery spending. This pattern is likely the result of an increased reliance on corner shops above normal levels.

Figure 3: Percentage Change in Consumer Sales April 2020 compared to April 2019, Imfoco 2020

Figure 4: Percentage Change in Consumer Sales June 2020 compared to June 2019, Imfoco 2020

Benefit Claims – Universal Credit

The release of the latest Universal Credit (UC) statistics from the DWP for June provide a stark contrast with the pre-lockdown figures in March. Overall, across Cornwall numbers rose from 24,876 in March to 48,458 in June, up by 23,582 or 95%. A large proportion of this increase were claimants in the “Searching for Work” conditionality. The number of people ‘Searching for Work’ on UC rose from 7,993 in March to 18,480 in June, up by 10,487 or 131%. The number of people claiming in the searching for work conditionality dropped by 1,390 between May and June. A reason for this drop alongside people finding employment, could be that a number of self-employed workers required Universal Credit support prior to the Self-Employment Income Support Scheme launching on the 13 May and were paid before the June count was undertaken.

Table 2: People on Universal Credit in Cornwall between March and June 2020, DWP 2020.

Percentage Change

In order to identify the impact COVID-19 has had on the number of claimants, figures for all Universal Credit claimants for March 2020 has been compared to the position in June 2020. Percentage change allows us to identify areas which have seen large increases whether from a low base or a high claimant level prior to the lockdown. It is worth noting that large relative percentage increases can mask the absolute scale of the changes this is why it is useful to look both the relative and absolute changes. Data has been sorted into percentiles.

Figure 5: Percentage Change in People on Universal Credit between March and June 2020 by MSOA in Cornwall, DWP and Cornwall Council, 2020

Numerical Change

Absolute change allows us to identify areas which have seen large numbers of additional claimants. This gives an idea of the scale of the impact for different parts of Cornwall. As stated before, it is worth noting that small increases in absolute numbers can mask the relative size of the changes hence, we have presented both the relative percentage changes and the absolute numerical changes.

Figure 5: Numerical Change in People on Universal Credit between March and June 2020 by MSOA in Cornwall, DWP and Cornwall Council, 2020

Figures 4 and 5 show that areas such as Newquay and St.Ives have seen both large percentage increases and numerical increases in people claiming Universal Credit. This highlights these areas as some of the most severely impacted in Cornwall. What is also clear is that the impact has not just been felt in towns across Cornwall. Many rural areas which historically have had low levels of Universal Credit claims are seeing large % increases. This indicator reveals that the geographical impact is not just solely focused on the traditional areas of employment deprivation.

Government Support

Coronavirus Job Retention Scheme[23]

Over a third of eligible jobs in Cornwall and the Isles of Scilly have been supported by the Coronavirus Job Retention Scheme since its launch. HMRC received 79,700 claims to furlough jobs across Cornwall and the Isles of Scilly (CIoS) up until the end of June 2020. This means that 35% of eligible jobs have been protected by the scheme in CIoS compared with 31% across the South West and 31% across the UK. The levels of government intervention across CIoS are some of the highest in the country (see figure 5), this highlights the severe impact the crisis has had on the business base and economy of Cornwall. The scaling back of the scheme in August is therefore likely to be particularly challenging time for the local economy and will more than likely result in a number of job losses as businesses are forced to make staffing decisions and adjust their expenditure according to current levels of demand.

Figure 5: Employment Furlough Take-Up Rate by Local Authority and Parliamentary Constituency as of June 30, HMRC 2020.

Self-Employment Income Support Scheme 

The government also announced a support package for the self-employed the Self-Employment Income Support Scheme. As of the 30 June 30,600 people in Cornwall and the Isles of Scilly (CIoS) have applied to the Self-Employment Income Support Scheme. The take up rate for this grant support in CIoS stands at 75% of the potentially eligible population.

Figure 6: SEISS Claims as a Proportion of the Potentially Eligible Population by Local Authority and Parliamentary Constituency as of June 30, HMRC 2020.

Cornwall and Isles of Scilly is an area with a significant take up rate compared to many parts of the country (see figure 6). The total value of claims made by people in Cornwall and the Isles of Scilly amounts to £85.6 million. Self-employed workers will have access to a second and final grant in August.

August 2020